State Farm and Allstate just faced tough questions from Delaware’s Supreme Court after both denied coverage to a driver injured by an uninsured motorist.
On July 25, the Delaware Supreme Court issued its decision in Mario De Los Santos v. Allstate Property and Casualty Insurance Company and State Farm Mutual Automobile Insurance Company. The case began with a car accident on Oct. 7, 2021, when Mario De Los Santos was rear-ended by an uninsured driver. Looking for help with his injuries and medical bills, De Los Santos turned to his two insurers -- State Farm and Allstate. Both companies denied his claim, insisting he was uninsured at the time of the crash.
The details reveal a tangled timeline. De Los Santos had a State Farm policy running from Sept. 27, 2021, to March 27, 2022. When State Farm raised his premium, De Los Santos decided to switch to Allstate. On Sept. 28, 2021, he visited Powell Insurance Agency, Inc. to apply for an Allstate policy. He handed the agent a check for the first premium and authorized monthly withdrawals from his Citizens Bank account for future payments.
But Allstate tried to collect the payment from an account ending in x4315 – a number De Los Santos said he didn’t recognize. The payment was returned unpaid. Allstate never tried to charge the Citizens Bank account De Los Santos had actually provided for the monthly payments.
On Oct. 4, 2021, De Los Santos went to David Soleye Insurance Agency, Inc. to cancel his State Farm policy, asking for it to end on Oct. 5. State Farm accepted the cancellation and processed a scheduled premium payment that day. State Farm later told De Los Santos the policy was canceled as requested and issued a refund check after he submitted a cash refund affidavit.
Two days after his State Farm policy ended, De Los Santos was hit by an uninsured driver. That same day, State Farm sent him a cancellation notice marking Oct. 5 as the end date of his policy. The next day, Allstate voided his policy for nonpayment, making the cancellation retroactive to October 5 – the day the policy was supposed to begin.
On Oct. 11, De Los Santos returned to Powell Insurance to apply for an Allstate policy again, using the same check as before. This time, Allstate charged his account without issue, and the policy began on Oct. 18.
De Los Santos asked both insurers to cover the Oct. 7 accident. Both refused. He sued in Delaware Superior Court, seeking damages for his injuries and medical expenses. The court sided with the insurers, finding that State Farm was not required under Delaware law to verify replacement coverage before canceling a policy, and that Allstate could void the policy for nonpayment.
On appeal, the Delaware Supreme Court affirmed the decision for State Farm. The justices explained that Delaware’s insurance statute (Title 18, Section 3915) only requires insurers to wait on refunding premiums until they know the customer has replacement coverage; it does not require them to verify new coverage before canceling a policy.
But the court reversed the decision for Allstate. The justices pointed out that De Los Santos had provided the same check for his second Allstate policy, and that payment went through without any problems. This raised a real question about whether Allstate or its agent had made an error with the account information the first time. The case was sent back to the Superior Court for further proceedings to determine if Allstate’s actions caused the payment to fail.
This case is a clear signal for insurance professionals: handling of premium payments and policy cancellations must be precise. The outcome didn’t touch health or life insurance, but for anyone in auto insurance, it’s a reminder that attention to detail in policy administration and communication can make all the difference – for both clients and carriers.
